Investment management chief investment officers (CIO) are rebalancing portfolios as sentiment towards the US dollar has fallen significantly over the past year, analysis from Asset Risk Consultants (ARC) has revealed.

Its latest market sentiment survey of CIOs, which examines the 12-month outlook for the major asset classes and sectors, revealed that the US dollar was the most negatively rated asset class among wealth managers.

In the second quarter of 2025, sentiment towards the US dollar recorded a net change of minus 78 compared to Q2 2024.

The downturn was driven by expectations that the Fed would cut ahead of other central banks, and growing concerns over US deficits and credit downgrades.

ARC found that alternatives led the way with the strongest positive readings, with optimism centred on gold, commodities, and hedge fund strategies.

Meanwhile, equities and cash saw more moderate support from CIOs, while bonds remained evenly balanced, which ARC said reflected uncertainty around the path of interest rates.

Commenting on the findings, ARC Research managing director, Dan Hurdley, said: “We think that the recent shift in sentiment against the US dollar reflects more than just momentum.

“While US policymakers may welcome a weaker currency to boost trade competitiveness, investors are looking ahead. Concerns are growing that deliberate depreciation could fuel inflation and raise interest burdens, sparking fears of a downward spiral.

“The dollar’s reserve currency status, once unquestioned, is now under increasing scrutiny. After years of outperformance, many managers are trimming USD exposure as part of broader rebalancing — and reassessing hedging strategies given the impact of currency moves on global portfolios."

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